2026 - 27 Federal Budget Highlights 

The Federal Treasurer, Dr Jim Chalmers, handed down the 2026–27 Federal Budget at 7:30 pm (AEST) on 12 May 2026. 

The government is proposing a tax reform package with three parts: 

• a "fairer" tax system for workers, first home buyers and future generations 

• a "better" tax system for businesses by encouraging investment and innovation, and • a "simpler and more sustainable" tax system. 

Summary details of the key income tax, business and superannuation measures are set out below.

Income Tax 

• The 50% CGT discount will be replaced with cost base indexation for all CGT assets (except new homes) from 1 July 2027, with a 30% minimum tax on realised gains also applying from that date. 

• A minimum tax rate of 30% will be payable by trustees of discretionary trusts from 1 July 2028, with a three-year rollover relief window for businesses wishing to restructure ahead of the change. 

Individuals 

• The 16% tax rate on income between $18,201 and $45,000 drops to 15% from 1 July 2026, then to 14% from 1 July 2027, saving taxpayers up to $268 in year one and $536 per year from 2027. 

• Each working Australian taxpayer will receive a $250 Working Australians Tax Offset (WATO) from the 2027–28 income tax year. Over 13 million workers will benefit, with 97% receiving the full amount.

• Negative gearing for residential property will be limited to new builds from 1 July 2027, with no change for existing arrangements held before Budget night. 

• Workers can reduce their taxable income by up to $1,000 for work-related expenses without keeping receipts from 2026–27, benefiting around 6.2 million taxpayers. 

• The Medicare levy low-income thresholds for singles, families, and seniors and pensioners will be increased by 2.9% from 1 July 2025. 

• Restrictions on foreign ownership of established housing will be extended to mid-2029, and Australia's foreign investment framework will be strengthened. 

• The age-based uplift of the private health insurance (PHI) rebate will be removed from 1 April 2027. 

• Payment of the full rate of pension supplement will be extended from 6 weeks to 12 weeks for recipients temporarily absent from Australia; it will cease for those permanently overseas or absent for more than 12 weeks. 

Superannuation 

• The Budget continues the implementation of Division 296, the 15% additional tax on earnings for total superannuation balances above $3 million. SMSF trustees and high-balance members should review their position before 30 June 2026. 

• Concessional contribution settings have been touched as part of the broader tax reset. We recommend all SMSF clients speak with our team to assess the impact on their individual arrangements.

Business 

• Australia will transition to a permanent 25% FBT discount for certain electric vehicles — from 1 April 2027 for eligible EVs over $75,000, and all eligible EVs from 1 April 2029. 

• The instant asset write-off of $20,000 for small businesses applying the simplified depreciation rules has been made permanent from 1 July 2026. 

• Companies with up to $1 billion in turnover will be eligible to carry back tax losses for up to 2 years from 1 July 2026, benefiting up to 85,000 companies. 

• Small start-ups in their first 2 years of operation will be able to receive a cash refund for tax losses, capped to the value of tax remittances relating to employment, from 1 July 2028. 

• Reforms have been announced to the R&D; Tax Incentive from 1 July 2028, including higher offsets for experimental core R&D, expanded refundability for young fast-growing firms, and an increased expenditure cap of $200 million. 

• The VCLP and ESVCLP tax incentives will be expanded from 1 July 2027 to reflect modern company valuations. The eligible venture capital investor program is closed to new applications from 12 May 2026 7:30 pm (AEST).

• The global and domestic minimum tax legislation will be amended from 1 January 2026 to implement the OECD/G20 side-by-side package agreed on 5 January 2026. 

Personal Services Income & Tax Residency PSI rules and tax residency settings are among the areas flagged as part of what advisers are calling a 'seismic tax reset'. If you operate through a company or trust and derive income primarily from your personal skills, or if you have international connections or split time between Australia and overseas, we recommend you speak with our team to assess your exposure. 

Not-for-Profit • The deductible gift recipients (DGR) list will be updated. 

GST and Other Indirect Tax

• Access to refunds of indirect tax under the Indirect Tax Concession Scheme has been extended. • More nuisance tariffs will be abolished from 1 July 2026. 

• The duty exemption for goods imported from Ukraine will be extended for a further 2 years to 3 July 2028.

• Funding will be provided and measures introduced to combat the illicit tobacco market.

Tax Administration

• Access to monthly reporting and payments, as well as dynamic PAYG instalment calculations, will be expanded for small and medium businesses from 1 July 2027. 

• Funding will be provided and measures introduced to protect and strengthen the tax system against fraud. 

• Funding will be provided from 2026–27 to strengthen governance requirements, supervision and enforcement in relation to managed investment schemes. 

• Funding will be provided to the ATO and other government organisations from 2026–27 to meet commitments under the Digital ID Act 2024 and maintain the security and reliability of the government's Digital ID System. 

• Funding will be provided over 2 years from 2026–27 to streamline regulatory systems and secure access to data, including synchronisation of director information, uplifting ABN authentication and completing the transition of ABN and superannuation lookup functions to the ATO. Legislation will also be introduced to improve regulation in the financial sector. 

• Funding will be provided from 2026–27 to address systems abuse in the child support scheme, including strengthening tax lodgment enforcement, extending Single Touch Payroll data sharing and expanding employer withholding to ensure more child support is paid in full and on time. 

• Reforms to harmonise state payroll tax administration frameworks will be explored as part of the government's national competition policy (NCP). 

Cyber Security & Digital Initiatives 

• Budget allocations have been made for Essential Eight uplift and critical infrastructure cyber resilience. For SMB clients, digital security investment may now attract additional government support. 

• Lynden Group's dedicated cyber advisory practice can help clients assess eligibility for government support, structure capital expenditure tax-efficiently, and align security investment with broader business planning. 

Housing, Infrastructure & Defence 

• A $2 billion Local Infrastructure Fund will support up to 65,000 new homes over the decade; total housing infrastructure investment reaches $6.3 billion. 

• The 2026 National Defence Strategy commits an additional $53 billion over ten years, the largest defence investment in Australia's history. 

• A rolling transport infrastructure pipeline of more than $120 billion over ten years includes the $812.5 million Bruce Highway upgrade in Queensland and $3.8 billion for Victoria's Suburban Rail Loop East.

• The Government is investing up to $1 billion in the Boyne Island Aluminium Smelter and has established a Critical Minerals Strategic Reserve targeting antimony, gallium and rare earth elements.

For tailored advice on how these Budget changes may affect you, your business or your investment strategy, contact Lynden Group. Our team can help you navigate the evolving tax, business and regulatory landscape with practical, commercially focused guidance. 

Email: info@lyndengroup.com.au